United Technologies agrees $30bn Rockwell deal

November 2017 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

November 2017 Issue

In a combination that creates a premier aerospace systems supplier, United Technologies Corp. (UTC) and Rockwell Collins, Inc. have reached a definitive agreement under which UTC will acquire Rockwell Collins for $140 per share, in cash and UTC stock.

The purchase price implies a total equity value of $23bn and a total transaction value of $30bn, including Rockwell Collins’ net debt.

Under the terms of the agreement, each Rockwell Collins shareowner will receive $93.33 per share in cash and $46.67 in shares of UTC common stock. UTC expects to fund the cash portion of the transaction consideration through debt issuances and cash on hand, and the company is committed to taking actions to maintain strong investment grade credit ratings.

Based in Farmington, Connecticut, UTC provides high technology products and services to the building and aerospace industries. The firm combines science with precision engineering to create sustainable solutions. On a pro-forma 2017 basis, UTC is expected to have global sales of approximately $67-$68bn following the transaction, based on estimated results.

“This acquisition adds tremendous capabilities to our aerospace businesses and strengthens our complementary offerings of technologically advanced aerospace systems,” said Greg Hayes, UTC chairman and chief executive. “Together, Rockwell Collins and UTC Aerospace Systems will enhance customer value in a rapidly evolving aerospace industry by making aircraft more intelligent and more connected. We have demonstrated we can successfully integrate large acquisitions into our business and I have full confidence that the team has the capability to do it again. Once we have completed the integration of Rockwell Collins, we will have an opportunity to explore a full range of strategic options for UTC.”

A leader in aviation and high-integrity solutions for commercial and military customers, Rockwell Collins is globally recognised for its leading-edge avionics, flight controls, aircraft interior and data connectivity solutions. As experts in flight deck avionics, cabin electronics, cabin interiors, information management, mission communications, and simulation and training, Rockwell Collins possesses a comprehensive portfolio of products and services.

“We are extremely pleased to announce this compelling transaction with UTC which is a testament to the value we have created for Rockwell Collins’ employees, customers and shareowners,” said Kelly Ortberg, chairman, president and chief executive of Rockwell Collins. “The combination will enable us to compete more effectively for future business through continued investments in innovation, world-class integrated product offerings and the ability to retain the top talent in the industry. We look forward to the next chapter in Rockwell Collins’ long and proud history, as part of UTC.”

Upon completion of the transaction, Rockwell Collins and UTC Aerospace Systems will be integrated to create a new business unit named Collins Aerospace Systems. Ms Ortberg will assume the role of chief executive, while Dave Gitlin, previously president of UTC Aerospace Systems, will serve as president and chief operating officer.

Acting as financial adviser to UTC is Morgan Stanley & Co. LLC, with Wachtell, Lipton, Rosen & Katz serving as legal adviser. For Rockwell Collins, J.P. Morgan Securities LLC and Citigroup Global Markets Inc. are acting as financial advisers and Skadden, Arps, Slate, Meagher & Flom is serving as legal adviser.

Projected to close by the third quarter of 2018, the transaction is subject to approval by Rockwell Collins’ shareowners, as well as other customary closing conditions, including the receipt of required regulatory approvals.

Mr Hayes concluded: “The combination of UTC and Rockwell Collins will also create new opportunities for the talented employees of both companies to advance innovation in a growing and dynamic industry. Importantly, both companies share cultures of mutual trust and respect, accountability and teamwork that will allow us to work together to achieve our common goals.”

Fraser Tennant